I Will Teach You To Be Rich - 155. “We have $22k in cc debt—but I want to renovate the house” (Part 1)

Episode Date: May 7, 2024

Paul and Morgan, 37 and 33, find themselves in a painful loop of arguments and unchecked spending, putting the future of their young family at risk. We hear about destination concerts, ongoing renovations, and charged vacations—but it’s their fixed cost percentage that is most worrisome. This episode is brought to you by: LMNT | Right now, LMNT is offering 8 single serving packets FREE with any LMNT order. This is a great way to try all 8 flavors. Get yours at https://drinklmnt.com/RAMIT. Viator | Download the Viator app and use code VIATOR10 for 10% off your first travel experience with Viator. Trade | Right now, Trade is offering our audience a free bag of coffee with any subscription at https://drinktrade.com/ramit. Netsuite | Get visibility to everything in your business one one place. Sign up and defer payments, with no interest, for six months at https://iwt.com/netsuite. Claritin | Visit https://claritin.com right now for a discount so you can get allergy relief and live Claritin Clear. Connect with Ramit • Get the Podcast Newsletter and exclusive Q&A about the show • Get Money Coaching with Ramit  • Download the Conscious Spending Plan • Listen to my book—now on Audible • Get my New York Times best-selling book • Get my no-numbers journal • Other episodes • Instagram • Twitter • YouTube Submit a question for the newsletter iwt.com/askramit  If you and your partner have a money issue and you want my help, I occasionally select a couple to work with, free of charge. Apply for my help here. Produced by Crate Media.

I'm coming to your cities. I recently did an event in New York. It was awesome. I loved bringing real couples up on stage. We had no idea what was going to happen. The crowd loved it. I was sharing real numbers. It was a blast and I want to do it again. I'm looking to coach couples on stage at my next two live events. One in Philly on June 1st, one in Boston on June 4th. If you and your partner want help connecting over money, you want to solve a big financial challenge you have, please apply at iwt.com slash live coaching. If you and your partner struggle to come up with a shared vision of your rich life, if you have different priorities about spending and saving, if you just can't get on the same page financially, I would love to coach you live on stage in your city. It is free of charge. You can apply at IWT.com slash live coaching. I'll see you in Boston and Philly. Recently, I had an event in New York City. I had hundreds of

people come and I brought actual real couples up on stage and did a mini podcast right there in front of everyone. It was awesome. And I'm very pleased to announce that I'm doing two more events. I want to let you know about it before anyone else knows. June 1st, I'm going to be in Philadelphia, June 4th in Boston. If you want tickets, you can get them at iwt.com slash Philly and iwt.com slash Boston. Between now and May 3rd, you can use the pre-sale code richlife to get tickets. Again, June 1st, I'll see you in Philly, and June 4th in Boston,

IWT.com slash Philly and IWT.com slash Boston. All really just when he wants something, he's gonna get it. Like there's no sense of can we afford this? We haven't carved out the time to make a plan. And it's not just on me to make a plan. Oh, we could talk about money, or we could just go out on the lake for three hours. You know, it's summertime, you know?

I guess I always had this view or fantasy, like, I'm always gonna be making more money. Like, as I get older, I'll get more raises, I'll be fine, and then... Like, when we were putting this all together, I realized we're kind of like at the edge of this cliff and we can back up or we would launch into, I think, a lot of debt. What would you want him to change?

I think more restraint. And then your role is what? The fun killer. When was the last time in a conversation about money you actually pulled out full comprehensive numbers of your financial situation? Never. Never. No.

Meet Paul and Morgan. Paul's 37. Morgan is 33. They've been together for 10 years and they have two young children. The major issue here is that they talk about changing their money behavior and they talk and they talk, but they don't really make any changes. This is so common among couples. So I want you to pay close attention as I try to peel apart what's really going on here.

This conversation, by the way, was filmed live in New York City. So I would encourage you to check it out on YouTube so you can see the body language and the facial expressions, which are so important to the story here today. Let's meet Paul and Morgan. Morgan, within the past couple months, says things like, I'm very stressed about money. I'm so stressed about money.

We got to work on our money. I would look at the bank accounts and I would see maybe what I have coming in in the next couple months. And in my head, I'm like, we'll be fine. Or we had two kids in daycare. We got one out of daycare. We're fine Mm-hmm, and how does she take that? Not well, I guess sometimes when it comes up, it's it's at random times

So in my head, I'm kind of avoidant or I don't want to deal with it in the moment. Maybe it's like At dinnertime or like oh my god, we need more money. We don't have enough money. And I'm like, I don't feel like talking about this right now. I don't feel like dealing with it. It's usually until I bring it up again. And then it can become like an argument. You feel like you're constantly the one bringing it up?

Yeah. Definitely. And then who makes the budget? We've sat down together to make a budget. A couple times. Or we tried apps like Mint or YNAB. But nothing has stuck. And then what happens when it doesn't stick?

We just fall back into the pattern of what we've been doing. Okay. Yeah. I mean life is so we both work full-time We have two young kids. I think life moves really fast Yeah, and it's hard to carve out that time or I don't carve out that time like today. You're here We're gonna speak for a few hours, right? Have you ever carved out this amount of time to talk about money? No, I feel like we have these moments of oh Something has to change we have kind of a big discussion and we're like we have these moments of, oh, something has to change.

We have kind of a big discussion and we're like, we're going to do this. We're going to change. We make a budget and then within days it's gone. Days? I think so. I can say days. When we were putting this all together, I realized we're kind of at the edge of this cliff and we can back up or we would launch into I think a lot of debt

Wow, okay. All right Why now why are we talking right now? I think that things would just felt so out of control that there has to be a change Hmm. And then how long has it felt like that? Mmm, I think it's just been building building but now we have two younger kids So now I have an income. For a while I didn't. I was in school.

So now I guess stakes feel higher. Because you have an income, the stakes feel higher. Why? Because, I don't know. I guess or with kids too. Kids I understand. Yeah. Two kids. That's a big deal. You want to kids too. Kids I understand. Yeah. Two kids.

That's a big deal, right? You want to make sure that they're protected. Yeah. Okay. Your kids are three and six, right? Yeah. Okay. Nice.

Nice. How about for you, Paul? How would you describe your relationship with money in the last decade? I guess I always had this view or fantasy like I'm always going to be making more money. I'm just going to get more money. Like as I get older, I'll get more raises, I'll do this and that and I'll be fine. And then that was my thinking when I was younger, then adding two kids to the mix and then a mortgage that I didn't plan on when I was younger and then breaking it down

and seeing like all the other things that we pay for. I'm just starting to realize that well I need to make some changes to hold on to what I have and to plan for things I want more than just assuming I'm going to have money and I'll get whatever I want. Like when you were younger and you thought about yourself with money, what visions came to mind? Like some people are like, I'm going to fly in a private jet or other people like I'm going to have a house in the suburbs.

What was your vision? That I was going to be rich. Okay. Rich means what? In that time when I was younger, rich meant having a lot of money. I think when I was younger, I just assumed like super materialistic. I'd have like a Ferrari, I'd have a mansion, I'd have a pool. We're talking about when I was younger.

Okay. And then how about like in your mid-twenties? I realized that I I chose a career that doesn't necessarily mean I'm going to be a Million billionaire as I imagined when I was five or six. Yeah, but when I was in my mid-twenties I I still thought that hey, I'm gonna be making more money later I'm not gonna have to really worry about anything. Whether I have a Ferrari or a Toyota, I will be financially stable. Paul can be very like, it's fine, it's fine.

And really glazing over things or generalizing issues. Why do you think he does that? Because it helps him not really be able to see what's going on and continue engaging in behavior that he wants to. So when you come and you're like, hey, I'm stressed out about money or we need to make this change and he goes, we're fine. Look, one kid's out of daycare. We did that.

How do you feel at his reaction? I think dismissed. Yeah. Yeah. you feel at his reaction? I think dismissed. Yeah. Yeah. And how does that feel? It can feel hard. Yeah. I usually will get angry or I give like a bigger reaction.

And then typically we'll have these conversations. I'll have a reaction and then we'll have this reckoning of like, okay, we have to do this and maybe we'll identify some action steps but then it never really moves past that. I'm fascinated by the moment where people realize life isn't going to turn out the way they envisioned it. For example, when we were kids, maybe we said we want a Ferrari or we want to be a marine biologist.

And then we start to learn how much things cost and slowly we change our mind. Now, when I'm speaking to Paul and Morgan, I heard several other clues. Paul loves to reassure Morgan, but he's light on the specifics. This is something really common that we hear over and over on the podcast, especially with men.

They recently added an income, they subtracted childcare, but it doesn't really seem to have made a difference. Another common issue when you don't know your numbers. And finally, I pay really close attention to the words they used. Stressed, angry, dismissive, argument, edge of a cliff. Remember, two kids, the stakes are high. We'll be right back after this short break. electrolyte formulation now in a 16 ounce can of sparkling water with flavors including citrus salt, watermelon salt, grapefruit salt, and black cherry lime. Whether it's the original electrolyte mix or the new element

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link at drinklmnt.com slash ramit. Again, drinklmnt.com slash ramit. We have a trip to Europe coming up later this year. One of our friends has a birthday party. We're going to be joining him and a bunch of other people. We're super excited. And my wife and I added a little time after the birthday so that we can just hang out in Europe, enjoy some leisure time, eat some great food. I always try to ask myself, what would make this a magical experience?

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Do more with Viator. Now back to the show. We had this argument over the subscription service that Alex wanted to get. Which one? Nugs.net. Have you heard of it? No. What is this? It's like for live music. Okay.

So he had brought it up really casually like at dinner. And I was already feeling stressed about, just like it was on my mind money. I reacted to it like what are you talking about? That doesn't make any sense. We already pay for Spotify. You have Sirius radio. Why do you need another subscription services and where this money is this money going to come from?

So it kind of really escalated. He got really defensive. Hold on. Let's just hear what happened. So you said that and then Paul just respond as you did. Music is one of my hobbies. I love live music and it's something that makes me happy. You can listen to music all the time. We listen to it. We go to live music. You have Spotify. I don't think this is a justified. I said it's only $ hundred forty nine dollars for the entire year

And then where is that coming from like from your budget from the money you have? Where's the hundred forty nine dollars? I couldn't answer the question. Yeah, like I Think the way that you phrased it was well, how much money do you have? Yeah to spend on that and And I couldn't answer. And then I think it spiraled into, we need a budget. We're spending so much money. We don't even know how much we have. What's going on? And I think I bring the emotion into it and he stays very neutral. Retirement comes up a lot. How much do you have for retirement?

You bring that up, right Morgan? You ever brought up retirement in your life? No. No. No. Okay. So, nugs. Why is it called nugs, first of all? Is this like a, is this a word? Because I never heard this word.

Am I saying a word that I'm going to get in trouble for? No. Okay. I think it's associated with like jam band. Jam band. So. Well, what does nugs mean? Like your nugs, your stash.

I don't know. What the hell? What's a nug? So, well, what does Nugs mean? Like your nugs, your stash. I don't know. What the hell? What's a Nug? All right. I don't know anything about this brand. Please don't get me in trouble for whatever this site is and word. I've never heard it in my life.

So did you end up signing up for? No, I did not. Okay. All right. This live music thing, Nugs, was the wedge into a much bigger, more contentious discussion about money. And it never really seems like it got settled. No.

It hasn't. Does this happen a lot? Somebody brings something up and then it just... Nothing happens from it? Uh, okay. I was informed by my editors that NUGZ means weed. If you want to laugh at me, this is the time. Look, I don't know anything about drugs, okay?

What I do wanna talk about is that a $12 subscription for this couple leads into a fight about retirement. This is so common with couples. They use a tiny expense as a wedge to talk about bigger topics. But if scarcity around that smaller issue is your entryway into discussion about money, it almost always means your conversation is going to go poor. If somebody looked at you from the outside, where you live or work or things like that,

what kind of conclusions you think they would draw about the financial part of your relationship? I don't know. I get in my head and feel pretty self-conscious about that. Especially with the house. Because it's not the way that I envision it to be. And we bought a fixer-upper. And we haven't fixed it up. So I get very self-conscious about having people over.

And that creates some tension. Paul can get pretty defensive about it. Yeah, I feel like buying a house was a huge investment. It took a lot of time to save up the money and it was me doing the legwork with that. The savings? The savings, yeah. Yeah, Paul, he saved while I was in college. We lived with my parents for a year.

When we got pregnant, that was one financial decision we made. Oh, to move in with her parents. Yeah, to save money. Paul was able to squirrel away. Lots of money. How much? Over $60,000. Really?

I'm like, well, I'm proud of doing this and Have somebody be like well, this isn't the way I want it to look like I'm embarrassed by it. It's kind of like Hurtful or yeah, I can see that also like you really worked hard for that Yeah, you accomplished a lot to be able to put that 20% down exactly. Okay. All right And I understand that you have watched the Netflix show, you've been listening to the podcast. Okay. So Paul, did you start to hear Morgan saying stuff like, Ramit said this, etc.? Yeah. Totally. That's common. I'm like, who's this Ramit? Yeah. I may have said something back about like,

oh great, someone's going to tell me to like stash all my money and not save my life, or not live my life. But Morgan made a point like Rameet's not like that. He wants to push like things you enjoy and have fun and live a fulfilling rich life. Trying to get the hook. Yeah. Did it work? I mean, he's here. Okay. You mentioned Paul in the pre-interview you said, she tells me things about money because she's listened to his podcast so now she thinks she's an expert. I guess that's what it felt like. It was like tidbits throughout the day about when she

was like listening to you like non-stop. She's like, it's time for a low-cost Vanguard index fund. Yeah, and I'm like, okay, you've been listening to me for a week. Like now you're like just telling me what to do but not really giving any advice or setting a plan. We haven't carved out the time to make a plan and it's not just on me to make the plan Is it time? I know you have two kids but Well, if I looked at your calendars, what would I see on your calendars work?

and then I usually do like drop off in the morning with the kids then I work then I get the kids and I Do dinner and all that stuff. Okay, and then I feel like by the end of the day. It's like it's tough Yeah, I get it. and I do dinner and all that stuff. Okay. And then I feel like by the end of the day it's like. Yeah, it's tough. Yeah, I get it. What about weekends? There's kid activities, work around the house, errands. There's definitely time.

Let's talk about time. I don't love the phrase, we all have the same 24 hours because a lot of us have different obligations, different capabilities, different experiences and different lives. But with that said, ultimately, if you want to get good at money, you have to spend time on it. There's no way around it. There's no trick. It's that simple. It's the same as if you want to learn how to cook or you want to speak Spanish. Now, in an ideal world, you would build the right systems and habits before you have kids because it's tough to start something new with really

young children. But if you didn't already build those financial habits, it's not too late. It's just important that you are both on the same page and that you both share some of the responsibility of money. So it's not just one person doing all the lifting. Listen as Paul tells me how he avoids money. I don't know avoidance maybe. Putting things that give instant gratification first maybe. Like oh well we can where we live we live on a lake right so

oh we could talk about money or we could just go out on the lake for three hours you know it's summertime you know you have a boat no that's another what someone wants a boat oh you want one yeah but we're we didn't put it on the hold on we're not I always have to ask because every time someone has a boat they don't put it on the conscious spending plan And then they just discover it randomly like four hours What you have a boat because I it goes like this they have a huge truck give a truck Yeah, okay, not a huge truck. We'll talk about what truck is not huge Tacoma a smaller. Okay, I don't know what that is

Yeah, you're not a good brand. We know you're not Toyota. I love it. Yeah Then they tell me they have a truck which is like, I know. You're not a good brand. We know you're not a truck. Toyota. I love it. Then they tell me they have a truck, which is like, you know, 120K TCO. And then I go, hey, you know, you live in Kansas. You literally have no hills, no nothing. Why do you have a truck? And they look at me like I'm stupid.

They go, Ramit, how else am I going to pull my boat? Go, what the **** boat? Where's that? All right. So you have kayaks, but no boat fire Yeah, I'm not I'm not even getting into that. Yeah I'm like Paul really just when he wants something he's gonna get it and that's felt hard like there's no sense of can we afford this or Where is that money coming from? It's very much like I want this

He almost gets like-focused on it. Last summer, I was like, the boat, I'm getting a boat. He's like, looking at boats. No, we're not getting a boat. You said that, we're not getting one. Yeah. And he's like, come on, we live on a lake, we need a boat. We need a boat.

No, we do not need a boat. Okay. So, Morgan, if you could have Paul change the way that he relates to money, and you could wave a magic wand, what would you want him to change? I think more restraint. And then your role is what? Like the fun killer. Right.

Yeah. But we'll also say, oh, don worry, like I'll be getting this commission in a couple months. Like we'll have this money coming in. Ah. Even like putting this together, he's like, we're not in a bad spot. It's pretty good. Like we're going to figure this out. Like very positive, but not no action or like how are we going to figure it out. Yeah. Yeah. We can say, yeah, it's good, but how?

Yeah, reassure. Do you know why you do that? Maybe to take some of the steam off in the moment. I don't know. In my head, like we're young, I'm just still optimistic. Like we'll figure this out. We'll have money. We'll be making more money.

We'll have more money coming in. I think that that's an issue that I always have whether money or not. I always want to solve the problem right away. I'll take care of it. I'll fix this. Then I get fixated on fixing something. Have you fixed your financial problems? No, I don't. I haven't fixed the problems, but I think I try to assist with bringing more money in as I can. But in terms of fixing our quote-unquote financial problem, no.

Do you understand the problem? Yes. Somewhat. Okay, that's a yes or no. Why is it that I meet so many men who reassure their wives that everything will be okay with money without them even knowing a single number in the family finances? Literally, how are you going to reassure your partner that it's all okay when you don't even know where your money is going? This really frustrates me. It goes from helpful to purely delusional. If someone walks up to me and they have a

gaping chest wound, am I gonna pat them on the back say, hey you'll be fine, it's gonna be okay. Of course not I know nothing about that injury. So what makes you think you can simply say it'll be fine to your partner By the way, your partner is almost always the one who actually handles the money Guys stop saying this your partner wants competence not reassurance. I want to say that again I want you to hear me closely your partner does not want your reassurance. I want to say that again. I want you to hear me closely. Your partner does not want your reassurance. They want your competence. So get involved with the finances and take on some of their responsibility. Hold that thought. We'll

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Head to IWT.com slash NetSuite. That's IWT.com slash NetSuite. IWT.com slash NetSuite. Now back to Paul and Morgan. Yeah. So my parents, they owned a business. My parents have always been just like spend beyond their means. I lived very comfortably, but no, never really like a sense of I would hear like under like

conversations of, oh, we don't have any money, but then they would be buying things. So it was always very confusing and like a little unsettling. How old were you when you started to hear these messages? Probably like in elementary, middle school. Okay. Who is it that said, we don't have enough? I think like my dad would say it a lot, but then he would also spend. They're like looking for dopamine, like just purchasing, feel good. I want this, we're gonna get that.

Like what? I remember Christmas time would go way over the top. And then always as like Apple started becoming bigger and bigger, we'd open all our gifts and then in the corner there'd be like a new computer, a new iPhone, like some ridiculous, very expensive thing. It would be very exciting. But I also like sensed from a young age like this just feels like it's too much. Right? Like it's okay to say no.

What about as you got older? Like you became a teenager? Yeah. What do you remember then? They also would make a lot of financial choice. Like they, I think they spent a lot of money. They would borrow money from someone else to pay another person. Really? Yeah. Like taking money out of the cash register at the business to buy something. And they always just kind of like figured it out. But I'm sure they paid so much extra money. Like my dad, when we were looking at a house, he was always like, do a balloon. He has this idea of this balloon

payment. You know what a balloon mortgage is? I know what a balloon mortgage is. That's how he. He told you to do that. That's how he bought his business. That's how he bought his house. What's his reasoning? Like he's like, what do you say? They don't have great credit. You just you pay a little now and then it gets more and more as you get settled. He

always would. He didn't really explain to me what it meant, but more of like, just do it. This is what I did and it worked for us. Look what we have. That's very interesting. Did you do a balloon payment by the way? No. How did you know not to?

Cause I've learned to do the opposite of what. There was no reason to. For my ears. That's a simple, nice heuristic. Whatever dad says, says I'm gonna go ahead and do the opposite right all right it was always like confusing like we had a lot of things and we also so I grew up in like the suburbs of New York City like in a pretty affluent area we had less money than those of us around us but lived within those means like of around us so you lived above your means? Yeah.

Okay. And like we had cars repossessed. Really? Yeah, like chaotic, like just always very chaotic and like what is going on? Wait, how come this didn't come up? What? Yeah. I mean that's surprising to me.

It's kind of extreme. That's not a common thing. And it was always like kind of humorous. Like they talk about that. Like oh they saw that the van was just like, gone. And then they didn't know what happened. And then they figured out. Oh, what did you make of that?

Oh, this is so chaotic. It fucked up. Yeah. Yeah. I think Morgan's dad told me a story because you guys had like a Honda van that they financed and I think they like refinanced it a couple times and he told me he ended up paying like over a hundred thousand dollars Honda mini man Glorified yeah, like oh I survived this this is what we did you'll be fine

but I remember like filling out my fafsa and my mom being like take out the max amount because You might have buy new books and and have everything for school and I was just like, take out the max amount because you might want to buy new books and have everything for school. And I was just like, okay. And then now I'm realizing I did not need to take out the maximum amount of the loan for what? For a new book that I barely opened? And how much do you think they made? Well, he tried to sell us the business. So we knew. Oh.

He said. Yeah, a couple years ago. And you were like, if dad's trying to sell this, I'm not getting it. He didn't tell us an exact number. He just said, you'll be making more than you're getting now. That's... First of all... And you'll live so comfortably and you'll... So I said, sign.

I'll take that. No. And I was like, no. How did he react when you said no? I think he was wounded, like, yeah, hurt by it. Does he still have it? No, he sold it. Well, my sibling took it over. Oh, really? And how were they doing with it?

And then they sold it again. It's like a hot potato. What the hell? Alright, don't tell anyone what this business is, because if they're trying to start it again, it's going to be dead in the water. Nope. Okay, wow. How are your parents doing with money now?

I think they're living comfortably, but they're going to run out of money. I get worried. Do they know that? I don't think they acknowledge it. No. What will happen if and when that happens? I don't know. It's a big point of like stress.

For you? Yeah. How did you grow up with money? The complete opposite. My parents were great with money. Like amazing. Wow. To the point where they would come home from the store, they would save the receipts, they

would write everything down in a notebook. When I was four, they purchased their second home. Well, they sold the first home, but we moved into a bigger house. And I remember my mom telling me when they lived in their first house, my mom was a teacher, my dad was an engineer, they were banking away my dad's entire salary. They didn't spend it on the house at all. They were just putting it in the bank. Where did they grow up?

They grew up in Bergen County, New Jersey, like North Jersey. They both came from, you know, not having much money growing up, living in tiny, tiny houses. And they wanted like a big suburban house. When I was four, they bought a 4,000 square foot house. What? Yeah. That's really big, especially for that time.

Yeah. And they still live in it. Yeah. Still live in it. Okay. It's paid off. Okay. Completely paid off now.

They own it. What do you remember them saying about money when you were elementary school age? Don't buy something you can't afford. Don't use credit card. Don't put money on credit. And don't finance. Just save the money. Did all the lessons start with the word don't? No, but I think they didn't.

But I saw, I guess growing up, the length of time it would take to purchase something or buy something. And what was your conclusion? A long time. I think as I got older, I was like, well, you could get this right away and put it on a credit card. When did you first go into credit card debt?

When I was in college. I maxed out a credit card. Are you in credit card debt now? Yes. How long have you been in it? Probably since after we bought our house. But it fluctuates. It'll go up to, it'll get higher, I'll pay a huge lump sum, and then it'll get low or

close to zero and then it'll start to trickle back up again and then I'll start paying it off quickly. Does it matter to you if you have credit card debt? I guess hypothetically no, but I understand the repercussions. That you're paying more than what your purchase was with interest and fees. Okay. Sounds kind of intellectual. Like, I understand you're paying more in interest, but like does it matter to you here?

I think recently it does because I'm, we're kind of in this cycle or we're hitting a wall within the past couple years of buying the house and having like the second kid that our savings is not going up past, it gets to a certain point and we're not growing anything more than that. I think that's what I'm realizing. But I also, I'll buy things on the credit card that I don't have the money in the instance to buy and I'll, like I said, I'll get commission and stuff quarterly and in my head I'm just like okay and within a couple months I'll have more money coming in I'll just put that on the card. So the commission ends up going to pay

off the debt it's already spoken for so you never really get ahead. Correct. Okay. Right. It's just a cycle. How are your parents doing with money now? Great. I think they they feel happy and a sense of self-worth that their house is paid off. I've said, you don't need... It's just the two of them there now in a 4,000 square foot house. I'm like, you don't need this. Why don't you move closer to us or get a condo somewhere? And they're like, well, we worked for this.

We paid this. We don't want to move. This is all our stuff is here. What do you think about that? I guess half is frustrating. You don't need the house. But at the other half is like, they did this. They accomplished it.

Do they live in a way that you admire when it comes to their money? I guess partially that they're so in tune with where every dollar goes, what they have, what they've invested, what they're growing. They're pretty frugal. So I'm not like a frugal person. So I don't admire that part. Like growing up, my dad always had like the beat up car and he was handy and would keep it running and stuff like that so they can still live the life they want and provide for their kids.

Morgan, anything that Paul missed? Any surprises for you? No, I'm always like, well, you had that modeled for you, so why don't you model it for me? Yeah. Like, teach me that. I have no concept of that. And what does he say? He feels more restricted by that idea than he was letting on with you.

I think it's so telling too, because when he like telling a story about me restricting his spending, he uses the same voice that he does describing his mom restricting. We have the same voice in his dialogues. Really? Yeah. What's that? Just a naggy, like, don't do that. But I'm like, you're using the same voice you use when you're talking about your mom.

Let's double the therapy amount and go to couples therapy. What do you think? That's pretty deep. How did I not know this until now? Paul? Maybe because my parents were frugal, maybe I felt restricted. And because you felt restricted, now you feel? That I need more.

More what? Money. Uh huh. Things. Yes. So would that start to explain why on a weekly or monthly basis you come home saying like, I want to get this, I want to get that, I want to get this? Yes.

Right. And then when you bring those things, you don't look at the money, right? You're not like pulling out your conscious spending plan or even how much is on you. I just see the thing. You see the thing. Yeah. And I say, yes. And then who makes the decision about whether you get that thing or not?

Myself and Morgan sometimes. What's the difference? Like, how do we know if it's gonna be you making the decision Paul or Morgan? If it's disgust, it's Morgan. If it's an impulse, if it's an impulse and I just do it, it's me. Yeah. Okay. I think Paul is very like rebellious against like limits.

Mm-hmm. Paul did say, I need someone to tell me what to do, but when they tell me I resist. Yeah. Paul, you remember saying that? Yeah. Okay. So he's rebellious. Go on.

It was difficult for me to hear that he's saying he was restricted because I think he got everything he wanted as a kid. Like I think they went on vacations They he had he has tons of like tons of things material possessions. So I don't think there was a lot of like Restriction, I think there were maybe limits set And hearing that as someone who didn't have limits. I'm like, I want those limits. Give me those. You want limits? Yeah. Well, who do you want? I want someone to tell me no.

Who do you want to set the limits? You want him to? Yeah. Okay. Or us both set the limits. Okay. Just a question. How likely do you think it is for him to set limits for you? Very unlikely. I mean, let's be real. He's not setting limits for himself. I think he feels like he doesn't like that frugality.

I just want, I earned this. I should be able to spend it. Yeah, I get that same sense. I'm a little puzzled, Paul. Like, if I grew up with parents who pulled out the receipt and then wrote it down in a notebook and then I'm sitting over here age five and I'm like, I want a Ferrari and now I want to go and spend my money on travel and credit card stuff

and et cetera, like something doesn't match there. I guess also I have the mentality like I work a lot, I work hard for my money, I want to enjoy it. I work a lot of hours per week. I have a stressful job sometimes, most of the time. And having experiences or doing things that cost a lot of times costs a lot of money, I jump into because I have this mentality I work so hard that I want to spend my money or I want to do things and not be restricted. You previously said that we work hard, we're going to go visit places.

If we have to pay it off months later, that's how it is. Tell me about that. Well, last year we booked like we never we don't get that much time alone being with two kids and last year we booked a trip to Key West together. It was somewhat spontaneous, I think. It was very spontaneous. A couple months before we planned it out. How did it come about? I was on Instagram and saw an advertisement for some bands we like playing at Key West Amphitheater. We booked the trip. I used credit card points.

That only covered one room of the stay one night because we booked like the bougie room on the beach with the balcony. Okay. Did you know that? What? Like, oh, we're going to use our points. It's going to pay for one night and we'll have to figure out the rest. Once I started looking at the hotels and it was one of those high weeks where all the hotels are more money.

So what did you do? I booked three nights at the hotel. It was like $800 a night, $900 a night. Okay. All right. Pretty expensive. Yeah. So you got one night covered and then two nights you're paying. On the a night. Okay. All right. Pretty expensive. Yeah. So you got one night covered and then two nights you're paying.

On the credit card. On the credit card. This credit card, did it already have debt on it? Yeah, but I don't recall how much, but not crazy. A couple thousand maybe. I don't think we used the credit card a crazy amount when we were there. It was mostly cash or debit. But the airline and the hotel was all on the credit card.

How much did it end up costing in total? I think when we ran the numbers afterwards, it was over $5,000. Maybe closer to $7,000 or something. That's a big difference. No, it was probably like $8,000. If we factor everything in. Yeah. Can't move forward if we're not honest about what the numbers are. The numbers are the numbers.

So I'll just say like that's a very easy to adopt technique, which is if you have a range, first off, if the range is like 5,000 to 5,500, fine. I get that. There's going to be some play. If it's like 5,000 to $5,500, fine. I get that. There's going to be some play. If it's like $5,000 to $7,000, that's a pretty big range. And if you're going to have that range, go for the top. All right. What do you do about the $7,000 in costs?

On the credit card? Yeah. You still paying it off? No. It got paid off toward the end of last year. There's new things on there. Oh, like what? Home improvement stuff, car maintenance, unexpected car stuff, and concert tickets.

Which concert? Fish. Okay, yeah. All right. And what kind of renovation stuff? The bet we're redoing the bathroom right now how much? There's there's no budget. It's no budget. We started redoing it We found bigger issues like in the house that had to be dealt with. Hmm that that's kind of

It wasn't just taking off a finish and replacing a finish like we had hoped for. Mm-hmm I'm doing it myself so saving money there. That's a very Midwest thing to say. You know when I talk about the Midwest money psychology. Can we look at the numbers? First of all, what was it like doing this conscious spending plan together? Definitely eye-opening. I don't like we said we made a budget previously. Never really stuck to it.

But I think because we haven't done, we haven't put the numbers on paper in front of both of us in quite some time since things have changed. What the f***? What? Hold on. I already love this. When you said you did a budget before before did you put numbers on paper? Yeah I'm saying it's been a while like how long that all right? How long has it been? Two years When did you do it last like what was going on there was like a financial planner through my work that we met with

Oh, I know he tried to sell us turn whole life insurance It was just like it got like a little bit of a fire Going was that so you could run away from his bad advice Yeah, we had the initial meeting we both got life insurance which we didn't have which we didn't get the you got term life insurance We had two kids like we need life insurance, okay, good. We needed it. Yeah, we didn't have it. We had two kids. We're like, we need life insurance. Okay. All right.

That's taken care of. And then what happened? Did you change anything after that? I don't know. That's pretty much how budgets go. Yeah. Yeah. It's like, ah, this sucks.

And then you do nothing about it. Yeah. All right. Well, the good news is your situation is not that uncommon. Like, but nobody likes budgets. The bad news is that situation is not that uncommon. But nobody likes budgets. The bad news is that you did not change anything anyway. No.

So you put the numbers into the CSP and what was that like? It was stressful. There was just a lot of like, I think with us when money gets talked about, like I immediately there's emotion. Like I get activated, I feel stressed. Paul gets very defensive and it just kind of gets, it's difficult. We don't move forward. We did it, but it was like cramming final hour.

Like we got to get this done. I think we were both avoiding it a little bit. Because? Why were you avoiding it? Just because I knew what the conversation was going to be like. What would it have been? It very much goes to, it feels like I'm the fun killer, policing Paul. He gets very defensive.

I have to convince him or kind of rationalize, talk him in the direction I want him to go in, which doesn't always work. What's that direction? Just toward like solution or spending less money. When high numbers were coming up, Morgan in the moment was like, oh, we got to stop spending this much. We need to do this.

We need to do that. But it was all we were trying to do is let's just put everything in here first and then let's figure out the solution. Point A to point B. Do you know why you were doing that, Morgan? I could be wrong, but I feel like you were looking for me to create the solution right then and there or to have the solution in that moment. Here's what I wish couples did before they filled out the conscious spending plan. I wish they would both sit down independently and ask themselves, how do I show up with

money in my relationship? Am I an avoider? Am I a worrier? Do I always try to get it done as fast as possible? And then I wish they would both write down how they want to show up. Maybe one wants to be more understanding instead of judgmental. Maybe another wants to be more engaged instead of avoidant. I wish couples would spend an hour talking about that and then 30 minutes on the CSP

numbers themselves. It's like that old quote about spending all the time sharpening the axe before you go and cut down the tree. Of course, nobody does this, but that's how it should be done. Focus on your own psychology, then the psychology of the two of you, and then, and only then, the numbers. We'll open up their conscious spending plan after this. I want to thank Claritin for being a sponsor of this episode. I've used Claritin myself multiple times. I woke up feeling horrible, sinuses all plugged up. And in my line of business, I need to be camera ready.

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Let's get back into it. As we go through the conscious spending plan, by the way, you can download the template and follow along at iwt.com slash csp. Morgan, can you walk through the net worth section? Just read off the words in bold and the full number next to it. Morgan, can you walk through the net worth section? Just read off the words in bold and the full number next to it. Assets, $495,000.

Okay. Investments, $16,994. Savings, $5,744. Debt, $218,718. And total net worth? $299,000. Debt $218,718. And total net worth? $299,020. All right. What do you think about that? I think it's pretty low. Okay. What do you think Morgan?

I thought we were going to be in like negatives. Okay. All right. Damn. It's like depressing in here right now. I'm like sweating. How do we know if this is good or not? I don't know. What do you think, Paul? You said it's pretty low. What number would be good? Just looking at the numbers like a higher savings and a higher investment would be good. So your response is, I don't know what would be good, but I know this is bad.

That's pretty much how most Americans feel about their money. It's like, all right, well, that's why I'm always going to have a job. All right. So look, I don't know if it's good or bad. I know that in general it's positive. I know that you're in your 30s. I know that looking at this, you have a net worth of $300,000 including a house. And alone, that just gives me a snapshot of where you are. Your income, your expenses, that tells me a lot more.

Right? So let's put a pin in the net worth. First of all, it's positive. That's a good sign. It's positive with $300,000. All right. Income. Paul, what is your combined gross monthly income? the net worth. First of all, it's positive. That's a good sign. It's positive with $300,000. Alright, income. Paul, what is your combined gross monthly income?

$14,307. Alright. So you make $14,000 per month. Gross. Gross. So what do you think about that number? I don't think it's... I wish it was net, but... Damn, a lot of depressed responses. I've never had a couple making $14,000 a month telling me all the things wrong with life.

What the hell is going on here? I just feel like where's the money? It just seems like, yeah, with all the costs and living in the area we do it seems like it doesn't go very far Have you ever felt good about money Yeah, when when I Guess when I see a lot of it which is a lot I guess when I see a lot of it. How much is a lot? I don't know.

Ten thousand? I wonder. Oh, look right here. Look at your investments. Read that investment number to me. 16,994. Okay. Do you feel good?

That number needs to be higher to be on track for retirement. So no. No on track for retirement. So no. No, not for investment. So you told me just a second ago, I feel good when I have 10,000. You have almost double that. You don't feel good. Is it possible when you have 50,000, you're not going to feel good? Could be.

Maybe. Because once you have more money, maybe you think you need more money. I think he puts values on things like versus numbers like like the things he has the experiences like what he does like Cars a boat No, but like I think in your mind that's What you feel like? All right, your fixed cost. What's that number Morgan?

what you feel like. All right. Your fixed cost, what's that number, Morgan? 84%. 84% on fixed cost combined. What do you think about that? Uh-oh. I just saw that look on your face. I went, ugh.

Yeah. Yeah. It just feels like out of control. Yeah, it's a lot. 84 is pretty high. Right here, if I had never met you, I could have already told you just from looking at this single number, one or both partners feels totally stressed by money. They feel like they're never going to get ahead.

They feel like it's never enough. They're probably fighting about money. Probably one other partner is avoiding it. I could see that from the differential in spending between partner one and partner two. And you know, I could kind of name off the type of dynamics happening in the relationship. Just from the numbers. And now that I've met you, we can tell that those are all true. The problems when it comes to money are not about a one-off concert or a one-off subscription

or eating out. It's not about that. It's about about that. It's about the big numbers that change it. And our behavior. Remember that the challenge with Paul and Morgan is that they talk and talk and talk about money, but they never really change much. There's also the fact that Paul avoids money and Morgan chases after him.

So after all the gloom and doom you heard from earlier in the conversation, what do these initial numbers tell you? Well, come back next week as we go deeper into their conscious spending plan with even more surprises. Thanks for listening to I Will Teach You To Be Rich. I'm Ramit Sethi. Please follow the show on Apple, Spotify, or wherever you listen to podcasts. If you haven't read I Will Teach You To Be Rich, my book, pick up a copy. You can get it at any bookstore or any library and it will show you the specific tactics for how to build the I Will Teach You To Be

Rich system into your personal finances.